SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement--Revised
[x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PEASE OIL AND GAS COMPANY
----------------------------------------------
(Name of Registrant as Specified in its Charter)
N/A
---------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------
<PAGE>
PEASE OIL AND GAS COMPANY
751 Horizon Court, Suite 203
Grand Junction, Colorado 81506
Phone (970) 245-5917 Fax (970) 243-8840
Notice of Annual Meeting of Stockholders
To Be Held on Saturday, June 13, 1998
Notice is hereby given that the Annual Meeting of Stock of Stockholders of
Pease Oil and Gas Company, a Nevada corporation ("Company"), will be held at the
Grand Junction Hilton in the Grand Ballroom, 743 Horizon Drive, Grand Junction,
Colorado on Saturday, June 13, 1998, at 10:00 a.m., Mountain Daylight Time, to
consider and act upon the following matters:
1. The election of four directors to hold office for three years and
until the Annual Meeting of Stockholders in 2001, and until their
successors are duly elected and qualified;
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 22, 1998,
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting or any adjournment thereof. The Company's stock
transfer books will not be closed.
Your are cordially invited to attend the meeting. Your vote is important.
Therefore, whether or not you plan to attend the meeting, please complete and
sign the enclosed Proxy Card and return the Proxy promptly in the enclosed,
postage prepaid, addressed envelope. The giving of a proxy will not affect your
right to vote in person if you attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
PATRICK J. DUNCAN
Corporate Secretary
April 28, 1998
PROXY STATEMENT
The Proxy Statement is furnished to Stockholders of Pease Oil and Gas
Company ("Company") in connection with the solicitation of proxies by the Board
of Directors of the Company to be used in voting at the Annual Meeting of
Stockholders to be held June 13, 1998 beginning at 10:00 a.m. at the Grand
Junction Hilton in the Grand Ballroom, 743 Horizon Drive, Grand Junction,
Colorado, or at any adjournment of said meeting. The Company's Annual Report to
Stockholders is enclosed with this Proxy Statement. It is planned that this
Proxy Statement and accompanying Proxy will be mailed to Stockholders on or
about April 28, 1998. Only holders of common stock ("Common Stock") of record at
the close of business on April 22, 1998 will be entitled to vote at the Meeting
of Stockholders. On that date, the Company had issued and outstanding 15,791,025
shares of Common Stock, which is the only class of voting securities of the
Company, and 113,333 shares of Series B 10% PIK Non-Voting Preferred Stock (the
"Preferred Stock"). All outstanding shares of Common Stock are entitled to vote
and each stockholder of record shall have one vote for each share of Common
Stock standing in his name on the stock transfer books of the Company. Each
stockholder shall have the right to vote all of such stockholder's votes for as
many nominees as there are directors to be elected. Cumulative voting is not
allowed under the Company's Articles of Incorporation.
The shares represented by each valid Proxy will, if received by the Company
in time for the meeting, be voted as authorized by each Proxy. IF NO
INSTRUCTIONS ARE GIVEN, THE STOCKHOLDERS' SHARES WILL BE VOTED IN FAVOR OF THE
PERSONS NOMINATED BY THE BOARD OF DIRECTORS AND UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING AND ANY ADJOURN MENT THEREOF. Each proxy is
revocable at any time before it is voted.
<PAGE>
VOTING PROCEDURES
The directors will be elected by the affirmative vote of the holders of a
plurality of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting, provided a quorum is present. A quorum is present
if the holders of at least a majority of the outstanding shares of Common Stock,
as of the record date, are present in person or represented by proxy at the
Annual Meeting. Votes will be counted and certified by one or more Inspector(s)
of Election to be chosen by stockholders at the Annual Meeting. The proxies
granted by stockholders will be voted individually for the election of the
nominees listed below, unless authority to vote is withheld as indicated in the
proxy. Where brokers or other nominees hold shares for beneficial owners and
have not received any instruction from their clients on how to vote on a
particular proposal, the brokers or nominees are permitted to vote on routine
proposals but not on non-routine matters. The absence of votes on non-routine
matters are "broker non-votes." Abstentions and broker non-votes will be counted
as present for purposes of establishing a quorum, but will have no effect on the
election of directors. There are no dissenters' rights applicable to the
election of directors.
ELECTION OF DIRECTORS
The number of directors on the Company's Board of Directors has been
established by the Bylaws of the Company and by resolution of the Board of
Directors as ten directors, in approximately equal numbers in each of Classes A,
B and C, elected by the holders of Common Stock. A vacancy on the Company's
Board of Directors presently exists and is not expected to be filled at the
Annual Meeting. With respect to the three classes of directors, the terms of the
three Class A directors expire in 2000, the terms of the three Class B directors
expire at this Annual Meeting and the terms of the three Class C directors
expire in 1999. Each director is elected for a term of three years. Unless
otherwise directed, the persons named as proxies on the enclosed form of Proxy
will vote the shares of Common Stock represented by the Proxy FOR the election
of the four persons named below nominated by the Board of Directors. If, at the
time of the meeting, any of these nominees shall become unavailable for any
reason, which event is not expected to occur, the persons entitled to vote the
Proxy will vote for such substitute nominee or nominees, if any, as they
determine in their sole discretion. The directors elected will be designated as
Class B directors and will hold office until the Annual Meeting of Stockholders
to be held in 2001. The nominees for directors, each of whom has consented to
serve if elected, are as follows:
<TABLE>
<CAPTION>
Director
Name Since Age Principal Occupation for Last Five Years
- ---- -------- --- ----------------------------------------
<S> <C> <C>
James C. Ruane 1980 64 Mr. Ruane has owned and operated Goodall's Charter Bus
(Class B Director) Service, Inc., a bus chartering business representing
Grey Line in the San Diego area, since 1958. Mr. Ruane
has been an oil and gas investor for over 20 years.
Homer C. Osborne 1994 68 Mr. Osborne was an officer and director of Garrett
(Class B Director) Computing System, Inc., a petroleum engineering and
computing firm, from 1967 until 1976, at which time he
organized Osborne Oil Company as a wholly-owned
subsidiary of Garrett Computing Systems, Inc. Mr.
Osborne has operated Osborne Oil Company as a separate
entity since 1976.
Stephen L. Fischer 1997 39 Mr. Fischer has been Vice President of Beta Capital
(Class B Director) Group, Inc., a financial consulting firm located in
Newport Beach, California, since March 1996 and from
April 1996 through March 1998 he was also a registered
representative of Signal Securities, Inc., a registered
broker-dealer. Between 1991 and prior to joining Beta
in 1996, Mr. Fischer was a Registered Representative of
Peacock, Hislop, Staley & Given, an Arizona based
investment banking firm. Since 1983, Mr. Fischer has
held various positions in the financial services
industry in investment banking, retail, and
institutional sales, with a special emphasis on the oil
and gas exploration sector. Mr. Fischer has been a
private investor in the oil and gas industry for over a
decade.
2
<PAGE>
<CAPTION>
Director
Name Since Age Principal Occupation for Last Five Years
- ---- -------- --- ----------------------------------------
<S> <C> <C>
Steve A. Antry 1996 42 Mr. Antry is founder and president of Beta Capital
(Class B Director) Group, Inc., a financial consulting firm located in
Newport Beach, California. Beta specializes in advising
emerging oil and gas exploration companies that have
Beta serves as a consultant to the Company. Prior to
forming Beta in 1992, Mr. Antry was an executive
officer of Benton Oil & Gas Company from 1989 to 1992
and a Marketing Director for Swift Energy's income
funds from 1987 to 1989. Mr. Antry is also the founder
and president of Beta Oil and Gas Company, a privately
held oil and gas company formed in 1997. Mr. Antry is
also a registered representative with Signal
Securities, Inc., a registered broker/dealer, and has
B.B.A. and M.B.A. degrees from Texas Christian
University.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF ELECTION OF THE FOUR
(4) NOMINEES LISTED ABOVE. PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
TO VOTE. ONLY YOUR LATEST DATED PROXY WILL BE COUNTED.
Information concerning the other directors of the Company whose terms
extend beyond this Meeting is as follows.
<TABLE>
<CAPTION>
Director
Name of Nominee Since Age Principal Occupation for Last Five Years
- --------------- -------- --- ----------------------------------------
<S> <C> <C>
R. Thomas Fetters, Jr. 1997 58 Mr. Fetters is currently an independent oil and gas
(Class A Director) consultant for several public and privately held
companies including XCL Ltd., Beta Oil and Gas Company
and Pease Oil and Gas Company. Mr. Fetters is also a
director of XCL Ltd., a publicly held company and a
director of Beta Oil and Gas Company, currently a
privately held entity founded by Steve Antry in 1997
which is expected to go public in 1998. He has over 25
years of exploration, production and management
experience, both domestic and foreign. From 1995 to
1997 Mr. Fetters was Senior Vice President of
Exploration of National Energy Group, Inc., Dallas,
Texas, and from February 1990, until September 1995, he
was Vice President of Exploration of XCL Ltd., and
President of XCL-China, Ltd. During 1989, he served as
Chairman and Chief Executive Officer of Independent
Energy Corporation. From 1984 to 1989, he served as
President and Chief Executive Officer of CNG Producing
Company in New Orleans, Louisiana, and from 1983 to
1984 as General Manager of the Planning and Technology
Division of Consolidated Natural Gas Service Co. in
Pittsburgh, Pennsylvania. From 1966 to 1983, he served
in various positions, from Geologist to Exploration
Manager, with several divisions of Exxon, primarily in
the Gulf Coast region of the U.S. and internationally,
in Malaysia and Australia. Mr. Fetters holds B.S. and
M.S. degrees in geology from the University of
Tennessee.
3
<PAGE>
<CAPTION>
Director
Name of Nominee Since Age Principal Occupation for Last Five Years
- --------------- -------- --- ----------------------------------------
<S> <C> <C>
Patrick J. Duncan 1995 34 Mr. Duncan has been the Chief Financial Officer of the
(Class A Director) Company since September, 1994, the Company's Corporate
Secretary since April 1995 and the Company's Treasurer
since March 1996. Mr. Duncan is responsible for all the
financial, accounting and administrative reporting and
compliance required by his individual job titles. Mr.
Duncan was an Audit Manager with HEIN + ASSOCIATES LLP,
Certified Public Accountants, from 1991 until joining
the Company as the Company's Controller in April 1994.
From 1988 until 1991, Mr. Duncan was an Audit
Supervisor with Coopers & Lybrand, Certified Public
Accountants. Mr. Duncan received a B.S. degree from the
University of Wyoming in 1985.
Willard H. Pease, Jr. 1985 38 Mr. Pease has been President and Chief Executive
(Class C Director) Officer of the Company since 1990. Mr. Pease was
Executive Vice President and Chief Operating Officer of
the Company from 1983 to 1990. Mr. Pease is responsible
for the Company's corporate finance, managing the
day-to-day operations of the Company and is principally
responsible for the Company's oil and gas exploration
and production activities. Mr. Pease has worked in the
oil and gas business for over 17 years. Mr. Pease
received a B.A. degree in management with additional
educational focuses in geology in 1983.
William F. Warnick 1988 50 Mr. Warnick has been a practicing attorney in Lubbock,
(Class C Director) Texas since 1971. Mr. Warnick serves as the Texas
Attorney General's appointee to the Texas School Board
Land Commission and is a member of the American, Texas,
and Lubbock Bar Associations. He is an oil and gas
investor and has served in various management positions
of private independent oil and gas companies. Mr.
Warnick received a B.A. degree in finance and a J.D.
degree in 1971.
Clemons F. Walker 1996 58 Mr. Walker has been an independent financial consultant
(Class C Director) since August of 1996. Prior to that he was employed as
an investment banker and stockbroker. Between 1978 and
August 1995 Mr. Walker worked for Wilson Davis in Las
Vegas, Nevada when Presidential Brokerage purchased the
Wilson Davis office in Las Vegas and he continued to
work for the surviving entity until August of 1996.
Since 1978 Mr. Walker has focused his efforts in
investment banking by supporting small-cap companies
through assistance in private placements, public
offerings and other capital raising efforts. During his
career, Mr. Walker has organized, advised, facilitated,
sold and participated in numerous debt and equity
transactions (both public and private) in a variety of
industries, including the oil and gas industry. Mr.
Walker has a bachelor of arts degree in Business
Administration from Brigham Young University with a
concentration in Finance. Mr. Walker is currently
president and a director of Montgomery Realty Group,
Inc., a publicly held company.
</TABLE>
4
<PAGE>
The Company's Board of Directors held 17 meetings during 1997. Seven
meetings were held by unanimous written consent signed by all directors without
an actual meeting and ten were actual meetings at which all directors except
Richard A. Houlihan (a director who resigned in November 1997) attended 75% or
more.
The Company has an audit committee which met once in 1997. This committee
currently consists of Steve A. Antry, James C. Ruane and William F. Warnick (Mr.
Warnick replaced Richard A. Houlihan in November 1997 upon his resignation from
the Board). The functions of the audit committee are to review financial
statements, meet with the Company's independent auditors and address accounting
matters or questions raised by the auditors.
The Company has a compensation committee which currently consists of James
C. Ruane, Homer C. Osborne, Clemons F. Walker and William F. Warnick, which met
once in 1997. The functions of the compensation committee are to review
compensation of officers and employees and administer and award options under
all stock option plans of the Company.
COMPENSATION OF DIRECTORS
Directors who are employees do not receive additional compensation for
service as directors. Other directors each receive a $1,000 annual retainer fee,
$750 per meeting attended and $100 per meeting conducted via telephone
conference. Directors may elect to receive the compensation either in cash or
Common Stock. All outside directors elected to receive Common Stock in lieu of
cash fees for 1996 and 1997.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Officers, directors and
greater than ten percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of the Forms 3 and 4 and any amendments thereto
furnished to the Company during the Company's fiscal year ended December 31,
1997, and Forms 5 and amendments thereto furnished to the Company with respect
to such fiscal year, or written representations that no Forms 5 were required to
be filed by such persons, only the following person who was a director and
beneficial owner of more than 10% of the Company's outstanding Common Stock
during the fiscal year filed late reports on Form 4:
Mr. LeRoy W. Smith (a former director) filed one late report on Form 4
reporting one transaction.
EXECUTIVE OFFICERS
Messrs. Pease and Duncan are the executive officers of the Company. The
executive officers of the Company are elected annually at the first meeting of
the Company's Board of Directors held after each annual meeting of stockholders.
Each executive officer of the Company holds office until his successor is duly
elected and qualified, his death or resignation or his removal in the manner
provided by the Company's Bylaws. There are no family relationships between any
of the directors or executive officers. There was no arrangement or
understanding between any executive officer and any other person pursuant to
which any person was selected as an executive officer.
EXECUTIVE COMPENSATION
The Table shows certain compensation information for services rendered in
all capacities during each of the last three fiscal years by the Chief Executive
Officer and each executive officer who received salary and bonus in excess of
$100,000 in 1997 (the "Named Executive Officers"). The following information for
5
<PAGE>
the Named Executive Officers includes the dollar value of base salaries, bonus
awards, the number of stock options granted and certain other compensation, if
any, whether paid or deferred.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
---------------------------------------- -----------------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying
Position Year Salary(1) Bonus Compensation Awards Options/SARs(#)
- ------------------------------ ---- --------- ------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Willard H. Pease, Jr........... 1997 $93,270 $5,000 None None 250,000
President and Chief 1996 $78,530 $5,000(3) $101,250(2) None 110,400
Executive Officer 1995 $75,240 None None None 139,600
J.N. Burkhalter................ 1997 $84,790 None $138,050(4) None 35,000
Former V.P. Engineering 1996 $68,690 $5,000(3) None None 27,000
and Production 1995 $69,680 None None None 88,000
</TABLE>
(1) Includes $240 contributed by the Company each year to a qualified 401(k)
retirement plan.
(2) At December 31, 1995 the Company owed $60,000 to Mr. Pease. This loan was
unsecured, bore interest at 8% per annum and was originally due on January
31, 1996. On March 9, 1996 the Board of Directors agreed to change the
terms of the note to allow the note to be convertible into the Company's
common stock at $1.00 per share, the then current market rate, in exchange
for a one-year extension on the note. On December 16, 1996 Mr. Pease
elected to convert the note in its entirety, the note was canceled and Mr.
Pease was issued 60,000 shares of the Company's restricted common stock.
The $101,250 shown as other annual compensation represents the difference
between the closing sales price as reported by NASDAQ on December 16, 1996
and the conversion price of $1.00 per share. No additional amounts have
been shown as Other Annual Compensation because the aggregate incremental
cost to the Company of personal benefits provided to Mr. Pease did not
exceed the lesser of $50,000 or 10% of his annual salary in any given year.
(3) On March 9, 1996 the Board of Directors issued to each of Mr. Pease and Mr.
Burkhalter 5,000 shares of the Company's Common Stock for prior services.
The shares were valued at $5,000, or $1.00 per share, which represented the
market price of the Company's common stock on the date of grant. The shares
are fully vested.
(4) Effective January 1, 1998, Mr. Burkhalter resigned his position as the
Company's V.P. of Engineering and Production in light of the Company's
anticipated sale of the Company's Rocky Mountain oil and gas assets. He had
resigned as a director on November 7, 1997. In connection with his
resignation, Mr. Burkhalter received total severance of $138,050 consisting
of office equipment and one vehicle valued at $5,850, and a future cash
obligation of $132,200. The cash obligation will be paid in monthly
installments through August 2000. This severance was granted by the
Company, in part, pursuant to the terms of an employment agreement dated
December 27, 1994.
6
<PAGE>
Option Grants in the Last Fiscal Year
Set forth below is information relating to grants of stock options to the
Named Executive Officers pursuant to the Company's Stock Option Plans during the
fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL OPTION/SAR GRANTS IN LAST FISCAL YEAR
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh)(3) Date
---- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Willard H. Pease, Jr.
President and Chief ............................. 200,000(1) 31.25% $ 2.69 11/07/07
Executive Officer ............................... 45,000(2) 7.03% $ 2.97 01/26/02
-------- -----
Total ..................................... 245,000 38.28%
J.N. Burkhalter ....................................... 35,000 5.5% $ 2.97 01/26/02
Former V.P. Engineering
and Production
</TABLE>
(1) These Options vest and become exercisable over a three year period.
Accordingly, one-third (or 66,667 options) vest and become exercisable on
November 7, 1998, 1999 and 2000.
(2) These options vested and became exercisable on July 26, 1997.
(3) The exercise price listed above was 100% of the market price of the Common
Stock on the date the options were granted or approved by the Company's
Board of Directors.
Aggregated Option Exercises in the Last Fiscal Year and the Fiscal Year-End
Option Values
Set forth below is information with respect to the unexercised options to
purchase the Company's Common Stock held by Named Executive Officers at December
31, 1997. No options were exercised during fiscal 1997.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in
Last Fiscal Year and FY-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End(#) at FY-End($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise(#) ($) Unexercisable Unexercisable
- ---- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Willard H. Pease, Jr ............................. None None 300,000/200,000 $140,300/-0-(1)
President and Chief
Executive Officer
J.N. Burkhalter .................................. None None 150,000/-0- $106,400/-0-(1)
Former V.P.Engineering
and Production
</TABLE>
7
<PAGE>
(1) The value of the unexercised In-the-Money Options was determined by
multiplying the number of unexercised options (that were in other money
on December 31, 1997) by the closing sales of the Company's common
stock on December 31, 1997 (as reported by NASDAQ) and from that total,
subtracting the total exercise price.
Employment Contract
The Company has entered into an employment agreement with a director,
Willard Pease, Jr., who is also the Company's President and Chief Executive
Officer. The employment agreement was entered into in 1994 and may be terminated
by the Company without cause on 30 days notice provided the Company continues to
pay the salary of Mr. Pease for 36 months. The salary must be paid in a lump sum
if the termination occurs after a change in control of the Company as defined in
the employment agreement. Mr. Pease may terminate the employment agreement on 90
days written notice. The base salary of Mr. Pease under the employment agreement
was increased from $95,000 to a base salary of $125,000 per year effective
January 1, 1998.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock, its only class of outstanding voting
securities as of the record date, by (i) each of the Company's directors and
officers, and (ii) each person or entity who is known to the Company to own
beneficially more than five percent of the outstanding Common Stock with the
address of each such person or entity:
<TABLE>
<CAPTION>
Voting Securities and Principal Holders Thereof
Name of Director or Amount and Nature of
Beneficial Owner Beneficial Ownership(1) Percent of Class
- ---------------------------- ---------------------- ----------------
<S> <C> <C>
Steven A. Antry ..................................... 526,953 Shares (2) 3.25%
Patrick J. Duncan ................................... 365,625 Shares (3) 2.27%
R. Thomas Fetters, Jr. .............................. 125,000 Shares (4) 0.80%
Stephen L. Fischer .................................. 219,650 Shares (5) 1.38%
Homer C. Osborne .................................... 52,557 Shares (6) 0.30%
Willard H. Pease, Jr. ............................... 986,139 Shares (7) 6.12%
James C. Ruane ...................................... 276,838 Shares (8) 1.75%
Clemons F. Walker ................................... 259,336 Shares (9) 1.63%
William F. Warnick .................................. 89,193 Shares (10) 0.60%
All Officers & Directors as a group (9 Persons) ..... 2,901,291 Shares (11) 16.30%
Kayne Anderson Non-Traditional Investments
1800 Avenue of the Stars, Second Floor
Los Angeles, CA 90067 ............................ 1,230,769 Shares (12)(13) 7.20%
8
<PAGE>
Name of Director or Amount and Nature of
Beneficial Owner Beneficial Ownership(1) Percent of Class
- ---------------------------- ---------------------- ----------------
<S> <C> <C>
Arbco Associates, L.P.
1800 Avenue of the Stars, Second Floor
Los Angeles, CA 90067 ............................ 1,094,017 Shares (12)(13)(14) 6.50%
Offense Group Associates
1800 Avenue of the Stars, Second Floor
Los Angeles, CA 90067 ............................ 1,537,521 Shares (12)(13)(14) 8.90%
Opportunity Associates, L.P.
1800 Avenue of the Stars, Second Floor
Los Angeles, CA 90067 ............................ 410,256 Shares (12)(13) 2.50%
Marine Crew & Co.
c/o BellSouth Master Pension
Trust, Chase/Chemical Bank
A/C State Street Bank & Trust Co.
4 New York Plaza
Ground Floor/Receive Window
New York, NY 10004 ............................... 1,537,521 Shares (12)(15)(16) 8.90%
Sandpiper & Co.
c/o Metropolitan Life Separate
Account EN Chase/Chemical Bank
A/C State Street Bank & Trust Co.
4 New York Plaza
Ground Floor/Receive Window
New York, NY 10004 ............................... 1,836,178 Shares (12)(15)(17) 10.40%
</TABLE>
9
<PAGE>
(2) Beneficial owners listed have sole voting and investment power with respect
to the shares unless otherwise indicated.
(3) Includes 2,998 shares that are owned directly by Mr. Antry, 7,500 shares
underlying presently exercisable options, 61,455 shares underlying
presently exercisable warrants, and 455,000 shares underlying presently
exercisable warrants that are held by Mr. Antry's wife.
(4) Includes 15,625 shares owned directly by Mr. Duncan, 150,000 shares
underlying presently exercisable options, and 66,667 shares underlying
options that become exercisable on November 7, 1998, 66,667 shares
underlying options that become exercisable on November 7, 1999, and 66,666
shares underlying options that become exercisable on November 7, 2000.
(5) Includes 25,000 shares owned directly by Mr. Fetters, 50,000 shares
underlying presently exercisable options and 50,000 shares underlying
warrants that become exercisable on certain future events.
(6) Includes 8,950 shares owned directly by Mr. Fischer, 4,000 shares owned by
his wife, and 206,700 shares underlying presently exercisable warrants.
(7) Includes 9,757 shares owned directly by Mr. Osborne and 42,800 shares
underlying presently exercisable options.
(8) Includes 121,173 shares that are owned directly by Mr. Pease, 364,966
shares are owned by entities affiliated with Mr. Pease over which shares
Mr. Pease has sole voting and investment power, 198,500 shares underlying
presently exercisable options and 101,500 shares underlying presently
exercisable warrants. Does not include 66,667 shares underlying options
that become exercisable on November 7, 1998, 66,667 shares underlying
options that become exercisable on November 7, 1999, and 66,666 shares
underlying options that become exercisable on November 7, 2000.
(9) Includes 187,528 shares owned directly by Mr. Ruane, 4,560 shares held by
Mr. Ruane as trustee for two trusts, over which shares Mr. Ruane may be
deemed to have shared voting and investment power, 12,250 shares underlying
presently exercisable warrants, 72,500 shares underlying presently
exercisable options.
(10) Includes 109,125 shares owned directly by Mr. Walker, 142,711 shares
underlying presently exercisable warrants, and 7,500 shares underlying
presently exercisable options.
(11) Includes 31,693 shares owned directly by Mr. Warnick, 57,500 shares
underlying presently exercisable options.
(12) Includes 885,375 shares owned, directly or indirectly, 586,300 shares
underlying presently exercisable options, 133,334 shares underlying options
exercisable on November 7, 1998. Does not include 133,334 shares underlying
options exercisable on November 7, 1999, 133,332 shares underlying options
exercisable on November 7, 2000, 979,616 shares underlying presently
exercisable warrants and 50,000 shares underlying warrants that become
exercisable on certain future events.
(13) Includes the number of shares of Common Stock issuable upon conversion of
outstanding Series B preferred stock at an assumed Conversion Price of
$0.73125. The Series B Preferred is convertible at any time at the election
of the holder. The Conversion Price of the Series B preferred stock is
based on a discount the market price for the Common Stock at the time of
conversion, as defined in the amended Certificate of Designation.
Accordingly, the number of shares issued upon conversion could be larger or
smaller, depending on the applicable Conversion Price at the time of
conversion. Also, this table does not include shares of Common Stock which
would be issuable upon conversion of additional shares of Series B
Preferred which might be issued to holders from time to time as payment in
kind for dividends on outstanding Series B Preferred.
10
<PAGE>
(14) KAIM Non-Traditional, L.P., a registered investment advisor ("KAIM"), is
the general partner of each of these entities. Kayne Anderson Investment
Management, Inc., a Nevada corporation of which Richard Kayne is President
and 75% beneficial owner, is general partner of KAIM. KAIM also serves as
manager and a partner of Kayne Anderson Off-Shore Ltd. which holds 30,000
shares of Company Common Stock. Mr. Kayne is also a co-general partner of
Arbco Associates, L.P.
(15) Includes 170,000 outstanding shares of Common Stock.
(16) State Street Research & Management, a registered investment advisor
("SSRM"), is the manager of the Metropolitan Life Insurance Company
Separate Account EN and the BellSouth Master Pension Trust. SSRM also
serves as manager of (a) State Street Research Global Resources Fund, which
holds 287,500 shares of Company Common Stock; (b) State Street Research
Aurora Fund, which holds 100,000 shares of Company Common Stock; and (c)
Duke Endowment Energy Account, which holds 30,000 shares of Company Common
Stock. SSRM disavows beneficial interest in any of the Common Stock.
(17) Includes 29,100 outstanding shares of Common Stock.
(18) Includes 58,400 outstanding shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General and Overview -
All existing loans or similar advances to, and transactions with, officers
and their affiliates were approved or ratified by the independent and
disinterested directors. Any future material transactions with officers,
directors and owners of 5% or more of the Company's outstanding Common Stock or
any affiliate of any such person shall be on terms no less favorable to the
Company than could be obtained from independent unaffiliated third parties and
must be approved by a majority of the independent disinterested directors.
Transactions with the Company's President-
At December 31, 1996 the Company owed certain affiliates of Willard H.
Pease, Jr. $116,719 principal, plus $31,398 in accrued interest, for oil and gas
revenue attributable to interests in wells operated by the Company that are
owned by Mr. Pease and certain related entities. Of the principal amount, $2,877
was incurred in 1994, $4,603 was incurred in 1993, $20,992 was incurred in 1992,
$85,518 was incurred in 1991 and $2,729 was incurred in 1990. The entire
principal balance of $116,719 plus $33,163 in accrued interest was paid in full
by the Company during 1997.
At December 31, 1995 the Company owed $60,000 to Willard H. Pease, Jr., the
Company's President and CEO. This loan was unsecured, accrued interest at 8% per
annum and was originally due in January 1996. In March 1996 the Board of
Directors agreed to change the terms of the note to allow the note to be
convertible into the Company's common stock at $1.00 per share, the then current
market price, in exchange for a one-year extension of the note. In December 1996
Mr. Pease elected to convert the note in its entirety, the note was canceled and
Mr. Pease was issued 60,000 shares of the Company's restricted common stock.
Until June 1993, Willard H. Pease, Jr. owned an oil well servicing
business, Grand Junction Well Services, Inc. ("GJWS"), which operated a workover
and completion rig. In June 1993, the Company acquired GJWS from Mr. Pease by
merging GJWS into a newly-formed subsidiary of the Company. In the merger, the
Company issued Mr. Pease 46,667 shares of Common Stock and the Company's 6%
secured convertible promissory note in the principal amount of $175,000, for a
total value of $350,000, which was the estimated fair market value of the GJWS
assets and business. The note was originally payable in three annual principal
installments of $45,000 on October 1, 1994, $65,000 on April 1, 1995 and $65,000
on April 1, 1996. The October 1, 1994 principal payment of $45,000 was paid on
time and the remaining installments were extended. The entire principal balance
of $130,000 plus accrued interest of $9,254 was paid in full by the Company
during 1997.
11
<PAGE>
Transactions with Beta Capital Group, Inc.-
In March 1996 the Company entered into a three-year consulting agreement
with Beta Capital Group, Inc. ("Beta"). Beta's president, Steve Antry, has been
a director of the Company since August 1996. The consulting agreement with Beta
provides for minimum monthly cash payments of $17,500 plus reimbursement for
out-of-pocket expenses. The Company also agreed to pay Beta additional fees, as
defined in the agreement, that are based on a percentage of the gross proceeds
generated from any public financing, private financing or from any warrants that
are exercised during the term of the agreement. The following is a summary of
amounts paid by the Company to Beta, or its agents, during 1997 and 1996 under
the terms of the agreement:
1997 1996
-------- --------
Monthly consulting fees .................................. $210,000 $162,500
Reimbursement of out-of-pocket expenses .................. 167,236 94,700
Fees related to funds generated from private placements .. 320,933 163,000
Fees related to funds generated from warrant exercises ... 273,855 4,506
-------- --------
Total ........................................... $972,024 $424,706
======== ========
In addition to the cash compensation, in 1996 the Company granted Beta
warrants to purchase 1.0 million shares of the Company's common stock for $.75
per share. For financial statement reporting purposes, these warrants were
valued at $294,000. As allowed under the terms of the agreement, Beta
subsequently assigned 400,000 of those warrants to other parties, including
100,000 to a Mr. Richard Houlihan, a former director of the Company and 206,700
to Mr. Stephen Fischer, a current director of the Company (Mr. Fischer is also a
principal of Beta). In March 1997, the Company granted Beta warrants to purchase
an additional 100,000 shares of the Company's common stock at $3.75 per share.
For financial statement reporting purposes, these warrants were valued at
$60,000. All the warrants granted Beta expire in April 2001.
Transactions with Other Directors-
In May 1997 the Company entered into a one-year consulting agreement with
R. Thomas Fetters, Jr. Mr. Fetters also became a director of the Company in May
1997. The terms of the consulting agreement provide for monthly cash payments of
$4,000 plus reimbursement for out-of-pocket expenses. Total amounts paid to Mr.
Fetters in 1997 were $74,610. The consulting agreement also provides for certain
cash incentives for acquisition and exploration projects initiated by Mr.
Fetters during the term of the agreement (of which none were initiated during
1997 or through the date of this report). In addition to the cash compensation
Mr. Fetters also received warrants to purchase 15,000 shares of the Company's
common stock at $1.25 per share and warrants to purchase an additional 100,000
shares at $3.00 per share.
In July 1997, the Company acquired a 0.1% overriding royalty interest in
the East Bayou Sorrel Field from an entity that Homer Osborne, a director of the
Company, was a principal. The interest was acquired for $50,000, consisting of
$40,000 cash and 3,150 shares of common stock valued at $10,000. Mr. Osborne
received all of the common shares and $7,000 cash in the transaction.
Transactions with Former Director and Officer-
Effective January 1, 1998, Mr. J. N. Burkhalter resigned as the Company's
V.P. of Engineering and Production in light of the Company's anticipated sale of
the Rocky Mountain assets. In connection with this resignation, the Company
entered into a Retirement, Severance and Termination of Employment Agreement
with Mr. Burkhalter that provided for total severance of $138,050. The severance
consisted of office equipment and one vehicle valued at $5,850 and a cash
obligation of $132,200, which will be paid in monthly installments through
August 2000.
12
<PAGE>
INDEPENDENT AUDITORS
Representatives of HEIN + ASSOCIATES LLP, the Company's principal
accountants, are expected to be available at the Meeting either in person or
using electronic or telephone conference facilities and will have an opportunity
to make a statement if they desire and are expected to be available to respond
to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the Company's proxy materials
relating to the next annual meeting of stockholders must be received by the
Company on or before January 1, 1999.
SOLICITATION OF PROXIES
The cost of soliciting proxies, including the cost of preparing, assembling
and mailing this proxy material to stockholders, will be borne by the Company.
Solicitations will be made only by use of the mails, except that if necessary to
obtain a quorum, officers and regular employees of the Company may make
solicitations of proxies by telephone or electronic facsimile or by personal
calls. Brokerage houses, custodians, nominees and fiduciaries will be requested
to forward the proxy soliciting material to the beneficial owners of the
Company's shares held of record by such persons and the Company will reimburse
them for reasonable charges and expenses in this connection.
OTHER BUSINESS
The Company's Board of Directors does not know of any matters to be
presented at the meeting other than the matters set forth herein. If any other
business should come before the meeting, the persons named in the enclosed form
of Proxy will vote such Proxy according to their judgment on such matters.
PATRICK J. DUNCAN
Corporate Secretary
Grand Junction, Colorado
April 28, 1998
13
<PAGE>
COMMON STOCK
PROXY
PEASE OIL AND GAS COMPANY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 13, 1998
The undersigned hereby constitute(s) and appoint(s) Willard H. Pease, Jr. and
Patrick J. Duncan, and each of them the true and lawful attorneys and proxies
("Proxies") of the undersigned with full power of substitution and appointment,
for and in the name, place and stead of the undersigned, to act for and to vote
all of the undersigned's shares of Common Stock of Pease Oil and Gas Company
(the "Company") at the Annual Meeting of Stockholders to be held at the Grand
Junction Hilton in the Grand Ballroom, 743 Horizon Drive, Grand Junction,
Colorado on Saturday, June 13, 1998, at 10:00 a.m., Mountain Daylight Time, and
at any and all adjournments thereof, for the following purposes:
(1) Election of Directors
[ ] FOR all Class A director nominees listed below (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
JAMES C. RUANE STEPHEN L. FISCHER
HOMER C. OSBORNE STEVE A. ANTRY
(2) In their discretion, the Proxies are authorized to vote upon such other
business as may lawfully come before the meeting, hereby revoking any
Proxies as to said shares heretofore given by the undersigned and
ratifying and confirming all that said attorneys and proxies may
lawfully do by virtue hereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). UNLESS OTHERWISE INSTRUCTED ABOVE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING FOR ELECTION OF THE
NOMINEES FOR DIRECTOR AS SELECTED BY THE BOARD OF DIRECTORS.
It is understood that this Proxy confers discretionary authority in respect of
matters not known or determined at the time of the mailing of the Notice of
Annual Meeting of Stockholders to the undersigned.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement furnished therewith.
Dated and Signed:
, 1998
----------------------------
----------------------------------
----------------------------------
Signature(s) of Stockholder(s)
Signature(s) should agree with the
name(s) stenciled hereon. Executors,
administrators, trustees, guardians and
attorneys should so indicate when
signing. Attorneys should submit powers
of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. PLEASE SIGN AND
RETURN THIS PROXY TO AMERICAN SECURITIES TRANSFER & TRUST, INC., P.O. BOX 1596,
DENVER, COLORADO 80201-9975. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IF YOU ATTEND THE MEETING.
